Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.36% at a 3-week low, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.40% at a 3-1/2 week low.
Stock index futures this morning are falling after the stronger-than-expected U.S. Dec payrolls report pushed bond yields higher and dampened expectations that the Fed will cut interest rates anytime soon. The chances for a -25 bp rate cut at the March FOMC meeting dropped to 54% today from a 100% chance a week ago.
U.S. Dec nonfarm payrolls rose +216,000, stronger than expectations of +175,000. Also, the Dec unemployment rate was unchanged at 3.7%, stronger than expectations of an increase to 3.8%.
U.S. Dec average hourly earnings rose +0.4% m/m and +4.1% y/y, stronger than expectations of +0.3% m/m and +3.9% y/y.
U.S. stocks are also being weighed down by negative carryover from a fall in European stocks as the Euro Stoxx 50 dropped to a 1-month low today as European government bond yields climbed to 3-week highs after Eurozone Dec CPI accelerated from Nov, reducing the chances of the ECB easing monetary policy.
The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 54% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield jumped to a 3-week high of 4.097% and is up +7.0 bp at 4.069%. The 10-year German bund yield climbed to a 3-week high of 2.217% and is up +6.9 bp at 2.193%. The 10-year UK gilt yield rose to a 3-week high of 3.852% and is up +9.9 bp at 3.826%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -1.01%. China’s Shanghai Composite Index closed down -0.85%. Japan’s Nikkei Stock Index closed up +0.27%.
The Euro Stoxx 50 today tumbled to a 1-month low and is moderately lower. Reduced expectations for ECB rate cuts undercut stocks after Eurozone consumer prices in December accelerated from November. Also, economic concerns are weighing on stocks after German Nov retail sales fell more than expected by the most in 19 months. In addition, European liquor stocks retreated today, led by a more than -5% slump in Remy Cointreau SA and Pernod Ricard SA after China launched an anti-dumping investigation into products like brandy from the European Union in retaliation for the EU’s probe last fall into China’s electric vehicle subsidies.
Eurozone Dec CPI rose +2.9% y/y from +2.4% y/y in Nov, right on expectations. Dec core CPI eased to +3.4% y/y from +3.6% y/y in Nov, right on expectations and the smallest pace of increase in 21 months.
German Nov retail sales fell -2.5% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 19 months.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 5% for its next meeting on January 25 and at 48% for the following meeting on March 7.
China’s Shanghai Composite Index today fell to a 1-week low and closed moderately lower. A protracted housing slump and weakness in manufacturing activity are weighing on market sentiment and undercutting Chinese stock prices. Automakers were under pressure as only four of 13 Chinese automakers that have disclosed sales figures met their sales targets for 2023, signaling intense market competition. Chinese technology stocks were also under pressure today, dragging the overall market lower.
On the positive side, Chinese lithium, EV battery, and charging-related stocks rose as the government issued a plan to strengthen the development of new energy vehicles and charging infrastructure. Also, Chinese robotics-related companies rose after the government vowed to develop a batch of emergency robots by 2025.
Japan’s Nikkei Stock Index closed moderately higher. An improvement in market sentiment is bullish for equities after the Japan Dec consumer confidence index rose more than expected to a 2-year high. A decline in the yen to a 3-week low against the dollar sparked gains in export stocks that lifted the overall market. Also, Japanese retailers climbed on strong December sales. In addition, real estate stocks rose after a report from Morgan Stanley said Japanese “real estate stocks could gain favor as investors focus on inflation.” On the negative side, Japanese providers of chips for the automotive industry fell after Mobileye plunged Thursday after forecasting 2024 revenue well below market expectations.
The Japan Dec consumer confidence index rose +1.1 to a 2-year high of 37.2, stronger than expectations of 36.5.
The Japan Dec Jibun Bank services PMI was revised downward by -0.5 to 51.5 from the initially reported 52.0.
Pre-market U.S. Stock Movers
Palantir Technologies (PLTR) tumbled more than -3% in pre-market trading after Jeffries downgraded the stock to underperform from hold with a price target of $13.
PayPal Holdings (PYPL) fell more than -1% in pre-market trading after BTIG downgraded the stock to neutral from buy.
Okta (OKTA) fell nearly -2% in pre-market trading after Jeffries downgraded the stock to hold from buy.
Apple (AAPL) slid nearly -1% in pre-market trading on iPhone demand concerns after Piper Sandler on Thursday became the second broker this week to downgrade the stock.
Agilon Health (AGL) plunged more than -20% in pre-market trading after cutting its full-year adjusted Ebitda estimate to a loss of -$55 million to -$69 million from a previous estimate of a profit of $6 million-$18 million.
MSCI Inc (MSCI) fell more than -1% in pre-market trading after Raymond James downgraded the stock to market perform from outperform.
Monday.com Ltd (MNDY) climbed more than +3% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $230.
Elanco Animal Health (ELAN) rose more than +1% in pre-market trading after Stifel upgraded the stock to buy from hold with a price target of $20.
Carnival (CCL) rose more than +1% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $22.
Beyond Inc (BYON) jumped more than +4% in pre-market trading after Needham & Co upgraded the stock to buy from hold with a price target of $40.
Dun & Bradstreet (DNB) is up more than +2% in pre-market trading after Raymond James upgraded the stock to strong buy from outperform.
Leidos Holdings (LDOS) climbed more than +2% in pre-market trading after Barclays upgraded the stock to overweight from equal weight.
Freshworks (FRSH) is up more than +1% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $30.
Earnings Reports (1/5/2024)
A-Mark Precious Metals Inc (AMRK), AngioDynamics Inc (ANGO), Boot Barn Holdings Inc (BOOT), Constellation Brands Inc (STZ), Greenbrier Cos Inc/The (GBX), Park Aerospace Corp (PKE), Veradigm Inc (MDRX), Waldencast plc (WALD).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
